Cairn IPO opens today; co to be among top 25

PTI|

Dec 10, 2006, 10.45 AM IST

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NEW DELHI: Cairn India Ltd will on Monday open India's biggest ever initial public offering (IPO) that will put the company among the top 25 listed corporates ahead of the recently-listed Reliance Petroleum Ltd.

"Our issue of 328.79 million equity shares in the price band of Rs 160 to 190 opens on December 11," CIL CEO Rahul Dhir told reporters here.

Cairn will garner at least Rs 5,260 crore and a maximum of Rs 6,247 crore. If it exercises an option to retain over-subscription of up to 4.9 crore shares, the proceeds would be a minimum of Rs 6,050 crore and a maximum of Rs 7,184 crore. The issue closes on December 15.

The IPO is 18.6 per cent of the fully diluted post-issue equity capital of Rs 176.43 crore. At the upper band, the company could touch a market capitalisation of Rs 33,500 crore, higher than RPL's Rs 29,180 crore on the BSE.

Cairn, whose Rajasthan oil discovery was the largest find in more than two decades, has already done a pre-IPO placement of 209 million shares, majority of which was picked by Petronas of Malaysia.

Dhir said Cairn plans to begin production from Mangla, Bhagyam and Aishwariya fields, the first three of the 19 discoveries in the Rajasthan block that established ultimate reserve of 3.6 billion barrels, in the first half of 2009. Initial production will be about 100,000 barrels per day, peaking to 150,000 bpd in 2010.

"The peak production will last for four years but we can keep the output at 150,000 bpd for another six years through enhanced oil recovery (EOR) project," Dhir said. He said Cairn plans to invest 1.2-billion dollar in developing the three fields in the Rajasthan block and another 150-million dollar in exploration.

The company has already tied-up a credit line of 850 million dollars and 600 million dollars from the IPO proceeds would be retained by Cairn India. Cairn Energy Plc of UK will retain 69.5 per cent in Cairn India after the IPO.

Besides the Rajasthan block, Cairn India has 22.5 per cent stake in the offshore Ravva field, which is currently producing around 50,000 barrels of oil per day. It also operates Lakshmi and Gauri oil and gas fields in Cambay basin.

Of the three largest Rajasthan Block fields of Mangala, Bhagyam and Aishwariya, Mangala is the first to be developed and Cairn is currently expecting first commercial crude oil production from the field during 2009, followed by Bhagyam within six months and Aishwariya within 12 months thereof.

"We also expect commencement of production from the small Southern Fields of Rajasthan Block to be from the Saraswati and the Raageshwari fields in the first quarter of 2007," the company's prospectus said, adding the combined output from the two fields would be 2,400 barrels per day.

Dhir said operating cost will be three dollars per barrel. Talking of the pre-IPO placements, he said Petronas has a lock-in period of three years and the company cannot sell the shares before that.

Cairn expects to begin commercial production in Mangala field during 2009 with initial production of up to 50,000 barrels per day and a plateau of 100,000 barrels per day.

The field would reach 96,000 barrels per day within nine months of beginning production and would remain at the plateau for three years before the field starts to decline.

"Based on the increase in proved plus probable reserves, Cairn India believes that there is further production potential available," the prospectus said.

The Bhagyam field, the second largest discovery on the block after Mangala, would produce 25,200 barrels per day. Production from Aishwariya field is estimated at 17,050 bpd on commencement, continuing at rates of between 14,340 and 12,45 barrels per day for three years, and declining thereafter.

Besides, smaller production from Bhagyam and Shakti fields are anticipated within six months of being production from Mangala, it said.